By 2020, the relationship between WeWork and SoftBank Group had soured, and WeWork was moving the Delaware Court of Chancery to compel SoftBank Group to turn over 89 emails withheld as privileged in litigation over a failed tender offer. WeWork’s argument for production was simple: The custodians, Combes and Sternberg, could not have had a reasonable expectation of confidentiality in those emails because they had been sent or received using their Sprint email accounts.
The Delaware Court of Chancery agreed with WeWork. In a December 2020 decision, In re WeWork Litigation, Civil Action No. 2020-02568-AGB, 2020 WL 7624636 (Del. Ch. Dec. 22, 2020), the court identified the salient question as whether “Combes and Sternberg [could] have a reasonable expectation of privacy when using their Sprint email accounts for SBG-related purposes ….” Id. at *2 (emphasis in original). It determined that the answer turned on a four-factor test:
(1) does the corporation maintain a policy banning personal or other objectionable use, (2) does the company monitor the use of the employee's computer or e-mail, (3) do third parties have a right of access to the computer or e-mails, and (4) did the corporation notify the employee, or was the employee aware, of the use and monitoring policies?
Applying that test, the court found that Combes and Sternberg could not have had a reasonable expectation of privacy in emails sent or received from their Sprint email accounts. Sprint’s code of conduct informed employees that they should have no expectation of privacy in any information sent or received using its network. And though Sprint had not historically exercised its right to monitor Combes’ and Sternberg’s network activity, it had the technical ability to do so and employees were informed that it had reserved that right. The court also found it noteworthy that Combes and Sternberg had discussed the need to institute common-interest or consulting agreements, showing a subjective awareness of the confidentiality risks that came from using their Sprint email accounts. The court thus ordered SoftBank Group to produce the 89 emails for Combes and Sternberg that it had withheld as privileged.
It is fair to ask why it matters that Combes and Sternberg used their Sprint email accounts to act on behalf of SoftBank Group, when SoftBank Group had an 84 percent ownership stake in Sprint at the time. But it is enough that the Delaware Court of Chancery thinks that it matters. Corporations looking to avoid SoftBank Group’s plight would thus be well served to ensure that communications with counsel take place using their own networks and email systems or, at a minimum, are protected by formal common interest or consulting agreements.
Joseph Schaeffer is a shareholder with Babst, Calland, Clements & Zomnir, P.C. in Pittsburgh, Pennsylvania.